Event-Driven

There could be a US$4.6bn secondary placement in Denso Corp (6902 JP) before year-end as Toyota Motor (7203 JP), Toyota Industries (6201 JP) and Aisin Corp (7259 JP) unwind cross-holdings.
Denso Corp (6902 JP) was down 4.85% yesterday (and even more intra-day) and the stock could remain under pressure for the next few weeks.
There will be limited passive buying in conjunction with the secondary offering and active investors will need to buy a lot of stock.

Kotak Mahindra Bank – US$1.2 Billion Lockup Release

By Sumeet Singh

In Jun 2023, CPPIB raised around US$750m via selling a 1.6% stake in Kotak Mahindra Bank (KMB IN). Prior to that it had sold a similar amount in Mar 2022.
CPPIB will be released from its placement linked lockup early next month.
In this note, we will talk about the lockup dynamics and past deals performance.

CIMC Vehicles (1839 HK): Possible H Share Buyback Offer

CIMC Vehicle Group Co Ltd (1839 HK) possible H Share buyback offer, excluding China International Marine Cntnrs Gp (2039 HK)’s shares, is HK$7.00, an 8.7% premium to the undisturbed price.
The key condition is approval by at least 75% of independent H Shareholders (<10% of all independent H Shareholders rejection). There could also be a 90% minimum acceptance condition.
The offer is light, but independent H shareholders holding blocking stakes will likely be supportive. The final offer will be made on “same or better terms”, suggesting a potential bump.

Hang Seng Indices (HSI, HSCEI, HS Tech) Recapping the Recaps – A Bit More To Trade

The final datapoints for the December Hang Seng Indices rebalances were recorded today, slightly altering the initially expected weights and flows.
The expected flows have slightly increased since the initial estimates on 15 then 17 November.
Across all three indices, I see a net total of roughly HK$13.4bn a side to trade.

HSI, HSCEI, HSTECH: Rebalance Flows Post Capping (Dec 2023)

The December rebalance of the HSI, HSCEI and HSTECH indices will use today’s closing prices to cap the index constituent weights at 8%. This will lead to large flows.
Li Auto (2015 HK) will have the largest inflows due to the HSI inclusion while Xiaomi (1810 HK) will have the largest outflow due to HSTECH capping.
There will be passive selling in HSBC Holdings (5 HK) for yet another rebalance due to capping of the stock in the Hang Seng Index (HSI INDEX).

CIMC Vehicles (1839 HK): Parent Privatisation?

CIMC Vehicles (1839 HK) is currently suspended pursuant to Hong Kong’s Code on Takeovers and Mergers.
SOE-Backed CIMC Group controls ~74% of CMIC Vehicle’s H-shares. Presumably, if any Offer was to unfold, it would be from the parent.
And what price for the H-shares? Around HK$9/share, a life-time high, would be in keeping with premiums seen in precedent PRC-incorporated privatisations.

CIMC Vehicles (1839 HK): $7.00/Share Indicative Offer From Parent – Really?!

After CIMC Vehicle Group Co Ltd (1839 HK) was suspended yesterday pursuant to Hong Kong’s Takeover Code, the expectation was an H-share Offer from its parent, SOE-backed CIMC Group.
CIMC subsequently announced an indicative Offer yesterday evening, from its parent, at a $7.00/share for each H-share, a pitiful 8.6% premium to last close. There is no concurrent A-share Offer.
CIMC traded around $7.00 late September, and comfortably traded through the indicative terms for most of July.

Asahi Offering: Discount Presents a Good Entry Point As Price Hikes & Tax Reforms Strengthen Asahi

By Oshadhi Kumarasiri

Two weeks ago, Asahi Group Holdings (2502 JP) revealed plans for a secondary offering, aiming to sell 33.48m common shares in international markets.
In this insight, we delve into the fundamentals of the business, identifying an opportunity if the offering is priced at a decent discount compared to Asahi’s current price.
We think recent price hikes and ongoing alcohol tax reforms position Asahi to outperform Kirin Holdings (2503 JP) in the next 3-4 years.

Quiddity Leaderboard F100/250 Dec 23: Final Expectations; Two Trading Days for Announcement

The F100 and F250 December 2023 index changes are likely to be announced after the close on Wednesday 29th December 2023.
In this insight, we take a look at the potential index changes for F100 and F250 based on rankings as of 27th November 2023.
There could be one change for the F100 index and six separate changes for the F250 index. Some names lurking close to the border can still make it.

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Nov 28

Daily Brief Event-Driven: 2024 High Conviction: Buy Hollysys and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

2024 High Conviction: Buy Hollysys
StubWorld: Rumoured Interest In PCCW’s Fibre
CNI Semiconductor Chips Index Rebalance: Yet Another Index Inclusion for Hygon
T&K Toka (4636 JP): Bain Decision Time as Progress Made on a Pre-Condition
Breaking Down Korean Regulators’ Official Details on New Short Selling System
ChiNext/ChiNext 50 Index Rebalance: Adds Outperforming Deletes Now
Another Day Ending in Y, Another Low-Balled Takeover – This Time Glosel (9995)
Wuxi Lead GDR Listing – Early Look – Another One in the Pipeline, Will Be Net Cash Post-Deal
Ecopro Materials: Overshooting Share Price and Upcoming End of Lockup in December
EQD | KOSPI 200 Stalling: Where to Go LONG on the Pullback?

2024 High Conviction: Buy Hollysys

Despite Hollysys Automation (HOLI US) receiving a myriad of proposals over the past three years, nothing moved forward. Calling an SGM to spill the board would change that status quo.
But Hollysys’ board stonewalled the SGM, pinning its reason – and a proposed injunction – on the subjective ownership of Ace Lead, and in turn, its 6.7% holding in Hollysys.
That injunction was dismissed last week. An SGM will now be held late January. A firm merger proposal is expected in the middle of next month. This is a buy.

StubWorld: Rumoured Interest In PCCW’s Fibre

Reportedly, Chinese investors, as well as Middle Eastern sovereign wealth funds, have expressed interest in acquiring a “significant ” minority stake in PCCW Ltd (8 HK)‘s fibre ops.
Preceding my comments on PCCW are the current setup/unwind tables for Asia-Pacific Holdcos.
These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

CNI Semiconductor Chips Index Rebalance: Yet Another Index Inclusion for Hygon

There are 3 changes for the CNI Semiconductor Chips Index that will be implemented at the close on 8 December.
This is yet another index inclusion for Hygon Information Technology C (688041 CH) – the stock continues to move higher on expected passive buying over the next two weeks.
Over the last 6 months, the adds have underperformed the deletes but there has been a significant improvement in performance over the last 2 months.

T&K Toka (4636 JP): Bain Decision Time as Progress Made on a Pre-Condition

T&K Toka Co Ltd (4636 JP) has satisfied the precondition of selling its Hangzhou Toka Ink stake to hold less than 30%. The offer is targeted for early January.
Due to Dalton’s stake building, the shares have consistently traded above Bain’s pre-conditional JPY1,400 offer. Bain can either launch the tender with unchanged terms or bump the offer.
A bump is likely as, despite the irrevocables, satisfying the minimum acceptance condition is challenging. The Board will struggle to recommend the offer if the shares remain above terms.

Breaking Down Korean Regulators’ Official Details on New Short Selling System

Concerning the newly imposed 90-day mandatory repayment period for institutional investors, the elimination of the recall risk during this period is not included in this improvement plan.
The right to re-establish the same short-selling position after the 90-day repayment period is unlimited. We should pay attention to the potential of this creating new trading events.
Institutions borrowing stocks from overseas are not subject to the 105% collateral ratio. However, everyone is subject to the 90-day repayment period, even for investors who borrow stocks from overseas.

ChiNext/ChiNext 50 Index Rebalance: Adds Outperforming Deletes Now

There will be 6 changes for the ChiNext Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index. Implementation is at the close on 8 December.
There is a lot of overlap between the adds and deletes across both indices with the one-way trade across both indices estimated to be CNY 2.4bn.
The adds and deletes have drifted lower over the last few months. However, the adds have outperformed the deletes significantly in the last month.

Another Day Ending in Y, Another Low-Balled Takeover – This Time Glosel (9995)

Today, Macnica Fuji Electronics Hol (3132 JP) (Macnica Holdings) announced that it would launch a tender offer to buy 100% of Glosel (9995 JP), a semiconductor trading company.
Glosel is special because it has three main assets. 1) 61% of net assets are inventory (<3mo), 2) 34% of net assets are net receivables (<3mos), 3) 8+% is securities.
For that, Glosel’s Board decided 0.71x book was OK. Nah. The register is reasonably wide open, and this is a delayed start. Someone might get noisy, but < 50/50 bet.

Wuxi Lead GDR Listing – Early Look – Another One in the Pipeline, Will Be Net Cash Post-Deal

By Clarence Chu

Wuxi Lead Intelligent Equipmen (300450 CH) is looking to raise around US$300m in its upcoming Switzerland GDR listing.
As per media reports, Wuxi Lead was said to be looking to raise US$495m via a Swiss GDR issuance, having secured approval to sell up to 78.3m shares.
Given the decline in its share price over the year, the eventual deal size could come to around US$300m as of its current last close.

Ecopro Materials: Overshooting Share Price and Upcoming End of Lockup in December

In this insight, we discuss the upcoming end of lockup in December for Ecopro Materials and why we believe Ecopro Materials’ share price will be much lower in 6-12 months.
A combination of the potential inclusion in KOSPI Fast Entry plus the temporary ban on short selling of stocks in Korea has helped to push up Ecopro Materials’ share price.
However, despite this sharp share price run-up, we think the risk-reward is horrible on this stock in terms of bigger downside risk in the next 6-12 months.

EQD | KOSPI 200 Stalling: Where to Go LONG on the Pullback?

By Nico Rosti

The KOSPI 200 INDEX has been rising for 4 weeks, it’s OVERBOUGHT and may soon perform a quick pullback, followed possibly by another rally.
The upcoming pullback is likely to be short-lived, in this insight we analyze where the pullback can reach, and where it should be possible to go LONG again.
The price area to watch is 330-326: if the index reaches there, the LONG trade odds will be good (assuming the uptrend will continue into the end of the year).

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Nov 27

Daily Brief Event-Driven: Asahi Group Placement – Follow Up – Shaping up for a Christmas Cheer and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Asahi Group Placement – Follow Up – Shaping up for a Christmas Cheer
CSI300 Index Rebalance: 14 Changes & A Few Surprises
KWEB Index Rebalance: Fenbi (2469 HK) & YSB (9885 HK) Added
Quiddity Aggregation of CSI300/500 and SSE50/180 Index Flows for Dec 2023: US$4.2bn One-Way!
Merger Arb Mondays (27 Nov) – Origin, OreCorp, Healius, Taisho, JSR, Eoflow, Hollysys, Haitong Intl
CSI500 Index Rebalance: 50 Changes a Side; Adds Gaining Ground on Deletes
CSI Medical Service Index Rebalance: Chunky Flows for Some Stocks
Porsche Automobile Holding: Q3 and Discount

Asahi Group Placement – Follow Up – Shaping up for a Christmas Cheer

By Clarence Chu

A group of shareholders aims to raise US$1.3bn (JPY197.8bn) by selling their respective stakes in Asahi Group Holdings (2502 JP) via an extended secondary follow-on.
We have covered the background of the deal in our earlier note, Asahi Group Placement – Relatively Small One when Compared to Previous Large JP Secondary Selldowns.
In this note, we talk about the updates since and look at the performance of some of the past large Japan deals.

CSI300 Index Rebalance: 14 Changes & A Few Surprises

There are 14 changes for the Shanghai Shenzhen CSI 300 Inde (SHSZ300 INDEX) at the upcoming rebalance that will be implemented at the close of trading on 8 December.
While most changes are in line with forecasts, there are some stocks that have not been added or deleted as the index committee has used their discretion.
The adds outperformed the deletes in the first half of the year with performance staying stable over the second half of the year. Position for outperformance ahead of implementation.

KWEB Index Rebalance: Fenbi (2469 HK) & YSB (9885 HK) Added

The December rebalance of the KraneShares CSI China Internet ETF (KWEB US) will take place at the close of trading on 8 December.
Fenbi Ltd (2469 HK) and YSB (9885 HK) will be added to the index and there are no deletions.
There is a big lock-up expiry in YSB (9885 HK) soon after the index inclusion and this could be an opportunity to access liquidity in the stock.

Quiddity Aggregation of CSI300/500 and SSE50/180 Index Flows for Dec 2023: US$4.2bn One-Way!

After market close on Friday 24th November 2023, the December 2023 index review results for CSI 300/500 and SSE 50/180 were announced.
CSI 300 and CSI will have 14 and 50 changes while SSE 50 and SSE 180 will have 5 and 18 changes respectively. There are many overlapping flows.
In this insight, I have presented the details of the index changes and aggregated the expected flows attributable to the four indices mentioned above.

Merger Arb Mondays (27 Nov) – Origin, OreCorp, Healius, Taisho, JSR, Eoflow, Hollysys, Haitong Intl

We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads Eoflow (294090 KS), 111 Inc (YI US), Taisho Pharmaceutical Holdin (4581 JP), Healius (HLS AU), Irc Ltd (1029 HK), Hollysys Automation Technologies (HOLI US), Origin Energy (ORG AU).
Lowest spreads – Azure Minerals (AZS AU), Toyo Construction (1890 JP), Tietto Minerals Ltd (TIE AU), Pact Group Holdings (PGH AU), IJTT Co., Ltd. (7315 JP).

CSI500 Index Rebalance: 50 Changes a Side; Adds Gaining Ground on Deletes

There are 50 changes a side for the CSI Smallcap 500 Index at the upcoming rebalance that will be implemented at the close of trading on 8 December.
There are 15 stocks that overlap between the CSI 300 Index and the CSI Smallcap 500 Index and there will be opposing flows from passive trackers.
One way turnover at the rebalance is estimated at 9.56% leading to a one-way trade of CNY 6.04bn. Industrials and Information Technology gain index spots while Materials and Financial lose.

CSI Medical Service Index Rebalance: Chunky Flows for Some Stocks

There are 4 changes for the CSI Medical Service Index that will be implemented at the close on 8 December.
The constituent changes plus capping result in one-way turnover of 5.9% and in a one-way trade of CNY 1.86bn (US$261m).
Some stocks will have passive flows from global trackers at the end of November while there will be flows from other local passive trackers at the close on 8 December.

Porsche Automobile Holding: Q3 and Discount

By Jesus Rodriguez Aguilar

My updated SOTP shows that Porsche Automobil Holding (PAH3 GR) is trading at a still massive 41.2% discount/NAV, implying that Porsche SE is liable for c. €6.5 billion legal claims, maybe too harsh.
Recent rulings have been favourable. The discount is partly due to capital allocation leaning towards debt servicing. Porsche SE is trading at 2024e 2.6x Fwd P/E and 7.3% dividend yield.
Porsche SE presents an attractive opportunity to gain exposure to Volkswagen and Porsche AG through a discounted and levered investment. Discount to NAV should systematically decrease.

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Nov 26

Daily Brief Event-Driven: CES China Semiconductor Chips Index Rebalance: Another Inclusion for Hygon and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

CES China Semiconductor Chips Index Rebalance: Another Inclusion for Hygon
T&K TOKA (4636 JP): Imminent TOB Launch? Imminent Bump Needed?
Index Rebalance & ETF Flow Recap: HSI, HSCEI, HSTECH, HSCI, Div+, Top50, ASX, FXI, Xiaomi, Tata Tech
STAR50 Index Rebalance: Big Impact Expected; Inclusion Up 40% in One Month
A/H Premium Tracker (To 24 Nov 23): H Down Vs A, SOUTHBOUND Selling Continues, Tech Still Sold
Weekly Deals Digest (26 Nov) – JSR, Taisho, Origin, OreCorp, Eoflow, Hollysys, Zeekr, Tata Tech
Last Week in Event SPACE: JSR, Prosus/Tencent, Hollysys, Tata Consultancy, Geely, EOFlow
Mainland Connect NORTHBOUND Flows (To 24 Nov 23): Chongqing Changan (Bought) Vs BYD (Sold)
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Origin Energy, Healius, OreCorp, Haitong Int., Taisho Pharma
SSE50 Index Rebalance: Five Changes; Adds & Deletes Moving in Lockstep

CES China Semiconductor Chips Index Rebalance: Another Inclusion for Hygon

There are 3 changes for the CES China Semiconductor Chips Index that will be implemented at the close on 8 December.
Hygon Information Technology C (688041 CH) will be added to a global index in a week and then there will be multiple index inflows at the close on 8 December.
After underperforming from May to September, the adds have gained ground on the deletes over the last two months and there could be further outperformance over the next two weeks.

T&K TOKA (4636 JP): Imminent TOB Launch? Imminent Bump Needed?

In August, T&K Toka Co Ltd (4636 JP) announced a TOB by Bain with a clearance hurdle of selling a 3.51% stake in Hangzhou Toka Ink (SH:688571) before launch.
Friday, the company announced that they put up a 3.6% stake for auction, with the sale to be executed that day. That likely triggers an early launch of the TOB.
The TOB Price is offensively cheap at 0.63x “official” book, and 0.53x book adjusted for equity affiliate price. The shares have traded through terms since launch. This should get bumped.

Index Rebalance & ETF Flow Recap: HSI, HSCEI, HSTECH, HSCI, Div+, Top50, ASX, FXI, Xiaomi, Tata Tech

The capping for the Hang Seng family of indices will use closing prices from 28 November while implementation will take place at the close on 1 December.
The changes for the next S&P/ASX 200 (AS51 INDEX) rebalance will be announced after the close of trading on 1 December.
It was another week of inflows for the iShares Emerging Markets (EMXC US) to take units outstanding to a new high.

STAR50 Index Rebalance: Big Impact Expected; Inclusion Up 40% in One Month

As expected, the index committee has used a 6-month minimum listing history and that results in one change to the SSE STAR50 (STAR50 INDEX) in December.
Sichuan Biokin Pharmaceutical (688506 CH) will replace Ninebot (689009 CH) in the index at the close on 8 December.
One way turnover is estimated at 2.18% and will result in a one-way trade of CNY 3,065m. Sichuan Biokin Pharmaceutical (688506 CH) has moved up and there will be pre-positioning.

A/H Premium Tracker (To 24 Nov 23): H Down Vs A, SOUTHBOUND Selling Continues, Tech Still Sold

The New and Better (17 weeks old) A-H Monitor has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
Hs with H/A pairs under-perform their As on average. H/A Pair intracorrelation is up and A premia continue to trend better.
SOUTHBOUND and NORTHBOUND were net sells overall. Everybody sold tech.

Weekly Deals Digest (26 Nov) – JSR, Taisho, Origin, OreCorp, Eoflow, Hollysys, Zeekr, Tata Tech

A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
ECM developments – Asahi Group Holdings (2502 JP)‘s US$1.3 billion secondary offering; ZEEKR (ZK US), Tata Technologies (TATATECH IN) and Cainiao Smart Logistics Network (1437124D HK) IPOs
Event-Driven developments – JSR Corp (4185 JP), Taisho Pharmaceutical Holdin (4581 JP), Origin Energy (ORG AU), Orecorp Ltd (ORR AU), Eoflow (294090 KS), Hollysys Automation Technologies (HOLI US).

Last Week in Event SPACE: JSR, Prosus/Tencent, Hollysys, Tata Consultancy, Geely, EOFlow

Now the time decay to expected approvals and tender offer start for JSR Corp (4185 JP) are getting steep. Time to Fight The FUD.
The accretion trade is going to plan as Prosus NV (PRX NA) sells Tencent (700 HK); and Prosus and Tencent both back their own shares.
Hollysys Automation Technologies (HOLI US)‘s board capacity to sabotage calling an SGM has finally run out of puff.

Mainland Connect NORTHBOUND Flows (To 24 Nov 23): Chongqing Changan (Bought) Vs BYD (Sold)

This is the somewhat-brand-spanking-new Quiddity Mainland Connect NORTHBOUND Monitor. We work off the same presentation as the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor.
The same few names continue at the top of the gross flows list – Kweichow Moutai, Contemporary Amperex, Zhongji Innolight, etc, but the nets are changing (and Chongqing Changan)
Last week, NORTHBOUND were again net sellers (RMB -3.16bn), but Shanghai saw net buys. The top two flows were Chongqing Changan Automobile Company (200625 CH) to buy, BYD to sell.

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Origin Energy, Healius, OreCorp, Haitong Int., Taisho Pharma

I tally 39 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
One new deal discussed on Smartkarma this week: Taisho Pharmaceutical Holding (4581 JP)‘s MBO.
Key updates on: Origin Energy (ORG AU), Healius (HLS AU), OreCorp (ORR AU), Haitong Int’l (665 HK), JSR Corp (4185 JP), Eoflow (294090 KS), T&K TOKA, and Hollysys (HOLI US).

SSE50 Index Rebalance: Five Changes; Adds & Deletes Moving in Lockstep

There are 5 changes for the SSE50 Index (SSE50 INDEX) that will be implemented at the close on 8 December. There is over 1x ADV to trade on some stocks.
We estimate a one-way turnover of 5.4% at the December rebalance leading to a one-way trade of CNY 4.85bn. Index arb activity could add to the impact on the stocks.
The adds, deletes and SSE50 Index (SSE50 INDEX) have moved nearly in lockstep since May and the passive flows could move things around a bit.

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Nov 25

Daily Brief Event-Driven: Taisho Pharma (4581 JP) – Japan’s Newest Biggest MBO; The Price Is Light! and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Taisho Pharma (4581 JP) – Japan’s Newest Biggest MBO; The Price Is Light!
OreCorp: Silvercorp Bumps. Goyder Now Supportive
Taisho Pharmaceutical (4581 JP): MBO Tender Offer at JPY8,620
EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades-Giving Thanks

Taisho Pharma (4581 JP) – Japan’s Newest Biggest MBO; The Price Is Light!

Just past the 22-year anniversary of the deal-break from a previous takeover involving the large OTC drug firm, Taisho Pharmaceutical Holdin (4581 JP) announced an MBO Takeover for the company.
Set at a 55.5% premium, it is not particularly surprising as a deal. The family is rolling in their interests. It looks like estate planning. The Board supports and recommends.
Unfortunately, like many recent MBOs, this one is light at 0.85 book where net cash, securities, and net receivables and inventory make up 68% of the takeover price.

OreCorp: Silvercorp Bumps. Goyder Now Supportive

On the 6 August, Canada’s Silvercorp (SVM CN) offered shareholders of Western Australian-based miner OreCorp (ORR AU) A$0.15 in cash and 0.0967 new Silvercorp shares, by way of a Scheme.
The Scheme Booklet was despatched on the 6 November with a Scheme Meeting on the 8 December. The IE viewed terms as fair.
Silvercorp has now bumped the cash terms to $0.19/share from $0.15/share. All other terms remain unchanged. Tim Goyder (5.14%) is now supportive. Done and done.

Taisho Pharmaceutical (4581 JP): MBO Tender Offer at JPY8,620

Taisho Pharmaceutical Holdin (4581 JP) has recommended an MBO tender offer of JPY8,620 per share, a 55.5% premium to the undisturbed (24 November).
The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 66.67% ownership ratio.
Irrevocables represent a 40.31% ownership ratio. The minimum acceptance condition requires a 44% minority acceptance rate. The offer is attractive vs. historical and peer multiples.

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades-Giving Thanks

By Simon Harris

Weekly summary of vol changes and moves across Global Markets
Analysing ATM volatility and skew changes over the last 5 days
We suggest a few trades to take advantage of the implied vol surfaces

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Nov 24

Daily Brief Event-Driven: Origin: Brookfield’s “Inferior” Alternative Proposal and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Origin: Brookfield’s “Inferior” Alternative Proposal
KOSDAQ150 Index Rebalance: 17 Changes a Side; Many Surprises
EOFlow (Further) Tests Investor Patience
KOSPI200 Index Rebalance: Mostly Expected Though Some Discretion Used
CareNet (2150) – Watch the TOPIX Birdy (Smallcap)
Origin Energy (ORG AU): Brookfield/EIG’s Latest Effort Falls Flat
Understanding & Assessing Yearend Dividend Arbitrage Structure Using Futures in Korea
Hollysys (HOLI US): Progress as a Binding Proposal Targeted for Mid-December
OreCorp (ORR AU): Silvercorp Returns with a Higher Offer
LX International: Positive Impact from Not Participating in Main Bidding for HMM

Origin: Brookfield’s “Inferior” Alternative Proposal

Origin Energy (ORG AU)‘s Scheme vote today was always going to be a tenuous affair with AusSuper’s ~17.5% blocking stake, and Perpetual also firmly in the “against” camp.
The Scheme meeting has now been adjourned. Origin said that based on the proxy votes, it was unlikely the Scheme would have achieved the required 75% approval by shareholders.
In addition, the Brookfield-led consortium has pitched a alternative non-binding and indicative proposal which Origin views as inferior to the existing Scheme, and has significant reservations as to its complexity.

KOSDAQ150 Index Rebalance: 17 Changes a Side; Many Surprises

There are 17 inclusions and 17 exclusions for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the December rebalance to be implemented at the close on 14 December.
While most of the inclusions were expected, there are many differences on the deletes. Trading the strategy becomes tougher with the short sell ban in place.
The adds have started to outperform the deletes over the last month and there could be more movement over the next 3 weeks to implementation.

EOFlow (Further) Tests Investor Patience

Back on the 25 May, when Medtronic Plc (MDT US) enter into a SPA with EOFlow (294090 KS)‘s CEO, with a follow-on Tender Offer, the whole construct looked pretty clean.
Then in August Insulet Corp (PODD US) launched its lawsuit, which in hindsight, should have been expected. Then earlier this month, news surfaced concerning a stock-backed loan to the CEO.
Now the CEO is selling, presumably to repay his collateralized loan. Shares are down 38% since the resumption of trading, and are now at a whopping 122% spread to terms.

KOSPI200 Index Rebalance: Mostly Expected Though Some Discretion Used

There will be 7 additions and 7 deletions for the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX EQUITY) at the December rebalance that will be implemented on 14 December.
The rebalance is on expected lines, though the index committee decided not to add Youngpoong Paper (006740 KS) to the index. Not really a big surprise given the price move.
HDC Hyundai Development Co-Engineering & Construction (294870 KS) is a surprise delete and there is not much short interest that could cover against the passive selling.

CareNet (2150) – Watch the TOPIX Birdy (Smallcap)

Carenet Inc (2150 JP) is a “medical contents” provider. It acts as a distributor of information to doctors and medical practitioners over the internet, and also consults with pharmaceutical companies.
On Wednesday, they announced that they were going to move from TSE Growth to TSE Prime as of 29 November.
At ¥31bn market capand this may turn people off, but it may be a treat for some. There is a reason why there are some big holders.

Origin Energy (ORG AU): Brookfield/EIG’s Latest Effort Falls Flat

Origin Energy (ORG AU) has postponed its scheme meeting to 4 December after it received a non-binding indicative proposal from Brookfield/EIG to amend the current scheme.
The Board admitted the current scheme was likely to be voted down if the meeting was held today. The alternative transaction structure will struggle to gain shareholder support.
If Brookfield/EIG walks, the share price will fall, at least in the short term. We think a reasonable deal break price is A$7.40, an 11% downside to the last close.

Understanding & Assessing Yearend Dividend Arbitrage Structure Using Futures in Korea

As the ex-dividend date in Korea has been before the dividend is determined, SSFs trade at a discount based on the anticipated dividend rather than adjusting dividend settlement proceeds explicitly.
The current dividend arbitrage yield for the financial companies can be seen as reflecting the postponement of the ex-dividend date to the next year.
We should pay attention to those with a significant dividend arbitrage yield but that did not amend their articles of incorporation earlier this year.

Hollysys (HOLI US): Progress as a Binding Proposal Targeted for Mid-December

The Hollysys Automation Technologies (HOLI US) Board has finally succumbed to shareholder pressure by targeting a special meeting of shareholders in the week commencing 22 January 2024.
The special meeting is a side event as the Board targets a binding proposal by mid-December, with some bidders proceeding to the confirmatory due diligence stage.
The BVI takeover structure and Hollysys’ undemanding valuation facilitate a competitive bidding process. A 10% uplift to the current highest offer (Recco’s US$26.50 offer) is possible.

OreCorp (ORR AU): Silvercorp Returns with a Higher Offer

Orecorp Ltd (ORR AU) has disclosed a revised offer from Silvercorp Metals (SVM US) at A$0.19 cash per share and 0.0967 SVM shares per ORR share.
The revised offer was necessitated due to the decline in SVM shares. Since 7 August, the revised offer is, on average, 7.8% higher than the previous offer.
Directors and irrevocables represent around 20% of voting rights. The revised offer should help the scheme get up. At the last close, the gross spread was 8.6%.

LX International: Positive Impact from Not Participating in Main Bidding for HMM

LX International announced today that it will not participate in the main bidding to acquire HMM Co.
This is likely to have a positive impact on LX International’s share price as many investors are relieved that company will not raise excessive amounts of capital to acquire HMM.
In addition, by not acquiring HMM, LX International has enough financial resources to continue to pay high dividends.

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Nov 23

Daily Brief Event-Driven: JSR (4185) – Time To Fight The FUD and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

JSR (4185) – Time To Fight The FUD
Ecopro Materials KOSPI 200 Fast Entry Assessment: With K Car as the Outgoing Constituent
Geely Stalls As ZEEKR Spins Off
S&P/ASX Index Rebalance Preview: Big Impact; A Week From Announcement
JSR Corporation (4185 JP): Risk/Reward as SAMR Approves Broadcom/VMware
Xiaomi (1810 HK): Outperformance Leads to Passive Selling & Opens Up Trading Opportunities
A Potential Fight for Management Rights of Socar Between Lee Jae-Woong and Lotte Rental
EQD | A Quick US/Global Equities Correction IS Possible Soon (…a Really OVERSOLD VIX…)
Blackstone&Permira/Adevinta: Firm Offer

JSR (4185) – Time To Fight The FUD

Many months ago I suggested the JIC Tender Offer JSR Corp (4185 JP) was not overwhelmingly high-priced, but that it would be “heavy” for months to come.
FUD and Flows would widen the spread. And they did.
Now the time decay to expected approvals and tender offer start are getting steep. Time to Fight The FUD.

Ecopro Materials KOSPI 200 Fast Entry Assessment: With K Car as the Outgoing Constituent

The fast entry screening spans from November 17th to December 7th. Given its current market cap, we should anticipate the potential success of fast entry.
The implementation date will coincide with the effective day of the December rebalancing, which is December 15th. There are precedents of successfully achieving fast entry with such a tight schedule.
The setup will be challenging due to the short selling ban. Nevertheless, with an existing position, there may be value in a market timing approach.

Geely Stalls As ZEEKR Spins Off

Geely Auto (175 HK)‘s share price has largely swatted away the pending US-listing of ZEEKR (ZK US).
ZEEKR was valued at US$13bn after a US$750mn fund raising in February. At that value, Geely’s 54.7% stake is worth 58% of its market cap.
Geely is trading around a six and half year low, and below its five average trailing/forward metrics.

S&P/ASX Index Rebalance Preview: Big Impact; A Week From Announcement

There could be 3 changes for the S&P/ASX 200 (AS51 INDEX) in December. There are unlikely to be any changes for indices higher up the hierarchy.
Passive trackers will need to buy between 7-11 days of ADV in the inclusions while the impact on the deletions will be larger at between 11-23 days of ADV.
Short interest has decreased on the potential inclusions and increased on the potential deletions. There is significant pre-positioning on some of the stocks.

JSR Corporation (4185 JP): Risk/Reward as SAMR Approves Broadcom/VMware

JSR Corp (4185 JP)’s pre-conditional tender offer from JIC is conditional on several regulatory approvals, notably China SAMR approval. JIC can waive the conditions precedent.
A takeaway from the Broadcom (AVGO US)/VMware Inc Class A (VMW US) SAMR clearance is that if JIC is willing to commit to restrictive conditions, SAMR approval can be obtained.
On 6 November, JSR reiterated a late December tender start. However, with time fast running out, the likely scenario is SAMR conditional approval with a delayed tender start.

Xiaomi (1810 HK): Outperformance Leads to Passive Selling & Opens Up Trading Opportunities

Xiaomi Corp (1810 HK) is a member of the Hang Seng Index, Hang Seng China Enterprises Index and Hang Seng TECH Index, among others.
Capping of stocks at 8% of the index weight will lead to selling in Xiaomi (1810 HK) at the close on 1 December, mainly from Hang Seng TECH Index trackers.
Relative underperformance vs the HSTECH Index from now to Tuesday will require passive to sell less stock, while outperformance will lead to increased passive selling. That opens up trading opportunities.

A Potential Fight for Management Rights of Socar Between Lee Jae-Woong and Lotte Rental

It was announced that founder of Socar Lee Jae-Woong purchased 336,000 additional shares of Socar. This signals a potential M&A fight for Socar between Lee Jae-Woong/related parties and Lotte Rental.
Founder Lee Jae-Woong and related parties currently own 37.8% stake in Socar versus Lotte Rental which has 32.9% stake.
Socar is currently trading at more attractive valuations and we like the company’s aggressive strategy to raise profitability.

EQD | A Quick US/Global Equities Correction IS Possible Soon (…a Really OVERSOLD VIX…)

By Nico Rosti

The VIX INDEX has reached very OVERSOLD levels, it could bounce soon. Our models predict a short-lived bounce, probably 1-week.
An increased VIX could trigger panic selling also in Asia-Pacific markets, dragging down returns and increasing volatility.
The S&P500 is also WEEKLY OVERBOUGHT, the combination of VIX OVERSOLD and SPX OVERBOUGHT for us is a clear indication: WEEKLY pullback incoming!

Blackstone&Permira/Adevinta: Firm Offer

By Jesus Rodriguez Aguilar

Permira and Blackstone announced a NOK 115.0/share offer, two months after their approach was unveiled. 3-month VWAP premium is 52.6%. The offer represents 18.3x EV/NTM Fwd EBITDA (vs. 14.6x comparables)
The three largest shareholders (c.72.3%) communicated at the outset their support, so it’s a done deal. 90% condition can be waived. Board says price “financially fair”, but cannot recommend it.
I set my TP at NOK 115. The consortium could achieve an IRR of 17.8% by year 8. Spread is 3.3%/6.65% (gross/annualised, assuming settlement by 31 May). Long.

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Nov 22

Daily Brief Event-Driven: What Should We Do About the Futures Basis Spread Caused by Hanwha Ocean’s Rights Offering? and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

What Should We Do About the Futures Basis Spread Caused by Hanwha Ocean’s Rights Offering?
Hollysys (HOLI US): In Court Today …
Taiwan Top 50 ETF Rebalance: Alchip (3661 TT) Going Back-To-Back?
Haitong International (665 HK): Vote on 15 December
Tata Consultancy Services (TCS IN): US$2bn Mega Buyback; Two More Trading Days Before Ex-Date
Nice Holdings: Material Increase in Dividends and Share Cancellations
DMA ONE: JSE December ‘23 Rebalance Rankings
Haitong Sec (665 HK) 15th Dec Scheme Vote
H.I.G./DX (Group): Recommended Offer with Possibility of Bump-Up

What Should We Do About the Futures Basis Spread Caused by Hanwha Ocean’s Rights Offering?

The day the basis spread disappears is this Friday, the 24th of November. This mirrors a comparable pattern observed during Korean Air’s rights offering in 2020.
If the spot price does not fall below the futures price of our entry until this Friday, we could potentially be in a profitable range.
There has been a notable pattern where the spread continues to exist until just before the moment when new share selling becomes feasible.

Hollysys (HOLI US): In Court Today …

A fortnight after co-COOs pitched a US$25/share indicative Offer for Hollysys (HOLI US), Ascendent Capital, holding 13.7%, tabled a US$26/share Offer. The Recco/Dazheng consortium offered US$26.50 a week later.
There is currently a dispute over the ownership and control of Ace Lead’s shares in Hollysys, which was subject to an injunction hearing in the Hong Kong High Court.
That hearing took place today. So I went along to hear first-hand the key arguments from both sides.

Taiwan Top 50 ETF Rebalance: Alchip (3661 TT) Going Back-To-Back?

Alchip Technologies (3661 TT) could replace Feng Tay Enterprise (9910 TT) in the Yuanta/P-Shares Taiwan Top 50 ETF at the December rebalance.
This ETF inclusion for Alchip Technologies (3661 TT) could come back-to-back with another index inclusion scheduled for the end of November.
Shorts in Alchip Technologies (3661 TT) have been building up while shorts in Feng Tay Enterprise (9910 TT) have surged over the last few months.

Haitong International (665 HK): Vote on 15 December

Haitong International Securities Group (665 HK)’s scheme meeting is on 15 December. The IFA considers Haitong Securities Co Ltd (H) (6837 HK)’s HK$1.52 per share offer fair and reasonable.
Key conditions include approval by at least 75% of independent shareholders (<10% of independent shareholders rejection) and a headcount test. No shareholder holds a blocking stake.
The high takeover premium ensures a done deal. At the last close and for the 18 January 2024 payment, the gross and annualised spread is 2.7% and 18.2%, respectively.

Tata Consultancy Services (TCS IN): US$2bn Mega Buyback; Two More Trading Days Before Ex-Date

Indian IT services giant Tata Consultancy Svcs (TCS IN) launched a US$2bn Buyback last week.
The company will buy up to 40,963,855 shares in a Tender Offer-style Buyback at a Buyback Price of INR4,150/share (an 18% premium to today’s close).
In this insight, we take a closer look at the indicative timeline of key events in this Buyback, the company’s Buybacks history, proration details, and what this means for investors.

Nice Holdings: Material Increase in Dividends and Share Cancellations

On 21 November, Nice Holdings (034310 KS) announced new shareholder return policies that included material increase in dividends and share cancellations.
First, Nice Holdings has decided to raise dividends by more than 10% every year for the next three years. Nice Holdings paid dividend per share of 410 won last year.
Nice Holdings also announced that it will cancel more than 1% of total outstanding shares every year for the next three years.

DMA ONE: JSE December ‘23 Rebalance Rankings

By Charlotte van Tiddens, CFA

We do not expect any constituent changes for the following indices: Top 40, Top 40 SWIX, FINI, FINDI or INDI.
HAR is expected to enter the RESI and AMS is expected to fall out.
After much anticipation, ANG’s indicative free float came in at 75%, 21.9 percentage points lower than the current SWIX float of 96.8%.

Haitong Sec (665 HK) 15th Dec Scheme Vote

Once the pre-cons were satisfied on the 15th November, it seemed pessimistic to stick to the delayed 29 December dispatch date for Haitong International Securities Group (665 HK)‘s Scheme Document.
And right on cue, the Doc was issued last night (21 Nov). The Court Meeting is the 15 December. with an expected cash despatch on or around the 18 January.
Trading at a gross spread to terms of 2.7%. The headcount test applies. But this should comfortably get up.

H.I.G./DX (Group): Recommended Offer with Possibility of Bump-Up

By Jesus Rodriguez Aguilar

DX Group PLC (DX/ LN) agreed to a 47.5p/share offer (plus 1p dividend, ex-dividend 16 November) from H.I.G., 33% premium, 8.8x 2023a EBITDA, to be conducted via scheme of arrangement.
DX had a substantial improvement in revenue and profitability in 2018-2023. Although irrevocables represent 33.1% of the share capital, some shareholders have some doubts and letters of intent total 21.5%.
Some shareholders will try to extract more: DCF-based 50p could be defended, 5.2% above current offer. Spread 1.05%/3% (gross/annualised, assuming 30 March settlement). I’d be long in case of bump-up.

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Nov 21

Daily Brief Event-Driven: Daito Trust (1878) Doing a ToSTNeT Buyback Which Is NOT a ToSTNeT Buyback… Unless It Is. and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Daito Trust (1878) Doing a ToSTNeT Buyback Which Is NOT a ToSTNeT Buyback… Unless It Is.
StubWorld: Prosus Trading “Rich”. And So It Should Be
Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: 18% One-Way Turnover & US$2.74bn Trade
Quiddity Leaderboard TDIV Dec 23: US$1.36bn One-Way, 20%+ Turnover, 2 Weeks to Announcement
Quiddity Leaderboard T50/100 Dec 23: Multiple Moves Could Affect TDIV Flows
FXI Rebalance Preview: One Potential Change in December
Hyundai Elevator: Hyun Jeong-Eun Resigns from the BOD Chairwoman Position
EQD | Modest ASX200 Rally Raises Questions About Direction
Healius Taps The Market. ACL Should Walk

Daito Trust (1878) Doing a ToSTNeT Buyback Which Is NOT a ToSTNeT Buyback… Unless It Is.

Back on 30 October, Daito Trust Construct (1878 JP) announced a large earnings, a new Shareholder Return policy, a higher payout this year, and a big buyback.
It said the buyback period would start two days later, but they did not specify the method (Daito Trust Construction (1878) – Big Buyback, Dense Register, 120% Payout This Year
Today they announced a ToSTNeT-3 purchase for “the whole size”, which is accompanied by a “Japan-style ASR.” Know your details.

StubWorld: Prosus Trading “Rich”. And So It Should Be

The accretion trade is going to plan as Prosus NV (PRX NA) sells Tencent (700 HK); and Prosus and Tencent both back their own shares.
Preceding my comments on Prosus/Tencent One are the current setup/unwind tables for Asia-Pacific Holdcos
These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: 18% One-Way Turnover & US$2.74bn Trade

Using data from the close on 20 November, there could be 6 adds and 5 deletes to the Yuanta/P-Shares Taiwan Dividend Plus ETF in December.
There will also be capping and funding flows that will lead to a one-way turnover of 17.8% and a one-way trade of US$1.37bn.
There are 16 stocks with at least 3 days ADV to trade from passive trackers and another 10 stocks that have at least 1-day ADV to trade.

Quiddity Leaderboard TDIV Dec 23: US$1.36bn One-Way, 20%+ Turnover, 2 Weeks to Announcement

In this insight, we take look at Quiddity’s expectations for index changes and capping flows for the TDIV Index for the December 2023 review.
There are some key changes to expectations since my last TDIV insight as a consequence of changes in share prices and/or dividend expectations.
I currently expect 6 ADDs and 5 DELs during the December 2023 review.

Quiddity Leaderboard T50/100 Dec 23: Multiple Moves Could Affect TDIV Flows

In this insight, we take a look at the names leading the race to become ADDs/DELs for the T50 and T100 Indices for the December 2023 Rebalance.
While I do not expect to see any changes to the T50 index, I expect four index changes for the T100 index.
Some of the names involved in the T100 index changes could have significant influence on our TDIV index flow expectations for December 2023.

FXI Rebalance Preview: One Potential Change in December

With the review period complete, BeiGene (6160 HK) could replace Anhui Conch Cement (914 HK) in the iShares China Large-Cap (FXI) (FXI US) in December.
There will be over 2 days of ADV to buy in BeiGene (6160 HK) and nearly 2 days of ADV to sell in Anhui Conch Cement (914 HK).
Short interest has been increasing in BeiGene (6160 HK) and dropping in Anhui Conch Cement (914 HK) over the last few months.

Hyundai Elevator: Hyun Jeong-Eun Resigns from the BOD Chairwoman Position

On 17 November, Hyun Jeong-Eun resigned from the Hyundai Elevator Co Board of Directors Chairwoman and internal director positions, mainly due to strong pressures from other major shareholders.
With Hyun Jeong-Eun finally out of the company, Hyundai Elevator is likely to significantly emphasize on improving its corporate governance.
Hyundai Elevator is considering new shareholder return policies, including a potential 50%+ dividend payout, higher share buybacks, and a mandatory minimum dividend yield.

EQD | Modest ASX200 Rally Raises Questions About Direction

By Nico Rosti

The S&P/ASX 200 INDEX closed up last week (CC=+1), currently uptrending, but the rally is weak, there is a chance that it could fall already this week and close down.
The index has reached Q2 resistance, that’s the area where the index starts to be OVERBOUGHT, based on the current pattern.
We see a potential pullback between -1% and -2% from current levels, across 1-2 weeks, this would bring the index down to the 6990-6920 support area.

Healius Taps The Market. ACL Should Walk

Back on the 20 March, Australian Clinical Labs (ACL AU) announced a merger proposal for Healius (HLS AU), the completion of which would create Australia’s largest pathology provider.
In its Target Statement on the 4 May, Healius’ board unanimously recommended that Healius shareholders reject the Offer. A forthcoming ACCC decision may also conclude a merger is verboten.
Now Healius has announced a “capital restructure reset” via issuing new shares at $1.20/share, a hefty 34.6% discount to last close. This breaches a number of prescribed occurrences.

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Nov 20

Daily Brief Event-Driven: Understanding Extreme SSF Spreads in Korea & Trading Approaches and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Understanding Extreme SSF Spreads in Korea & Trading Approaches
HSI Dec23 Index Review/Flows – Li Auto & Wuxi Apptec IN, No Deletes; 100 Names a Distant Dream
Origin Energy (ORG AU): State of Play
Hang Seng Tech Dec23 Index Review/Flows – No Name Changes, Some Big Capping Flows
HSCEI Index Rebalance: Zhongsheng (881 HK) Uses Up Another Life
A/H Premium Tracker (To 17 Nov): H up Vs A Despite SOUTHBOUND Net Selling; High Div SOEs Normalising
HSCEI Dec23 Index Review/Flows – NO ADDs, No DELETEs; ~2.5% One Way
Merger Arb Mondays (20 Nov) – Eoflow, Origin, OreCorp, Azure, Hollysys, Toyo, Amara, Haitong Intl
HSCI Index Rebalance: Keep (3650 HK) & TUHU Car (9690 HK) Added
HK Connect SOUTHBOUND (To 17 Nov 23); High-Div SOEs Pause, Tech + ETFs Break 16wk Inflow Streak

Understanding Extreme SSF Spreads in Korea & Trading Approaches

Futures backwardation resulting from the short selling ban will persist. Also, the contraction of market making will lead to more widespread and frequent occurrences of extreme spreads.
The straightforward sell arbitrage (reverse cash and carry) is no longer viable. We must pay attention to the emergence of new price and trading patterns driven by these market conditions.
One potential pattern is the possibility of spot buying centered around those that exhibited extreme spreads at expiration. This has already been observed to some extent in this month’s expiration.

HSI Dec23 Index Review/Flows – Li Auto & Wuxi Apptec IN, No Deletes; 100 Names a Distant Dream

On Friday, Hang Seng Indices announced the changes to the benchmark Hang Seng Index, the index in the family with the largest AUM.
Li Auto (2015 HK) and WuXi AppTec (2359 HK) are added. There are no deletions.
I see 3.4% a side to trade and across the three major indices there are larger net flows, but few compelling ones given possible pre-positioning.

Origin Energy (ORG AU): State of Play

The Origin Energy (ORG AU) scheme vote is on 23 November. Brookfield/EIG’s best and final offer is A$6.59 and US$1.86 per share, currently worth A$9.45.
With AusSuper reportedly increasing its stake past 17% on Friday, the scheme vote remains too close to call. Brookfield/EIG will need a large YES vote turnout for a successful vote.
If the scheme is voted down, there are mainly three Plan Bs – Brookfield/EIG’s alternate transaction structure, Board-initiated strategic review or maintaining the status quo.

Hang Seng Tech Dec23 Index Review/Flows – No Name Changes, Some Big Capping Flows

The Dec 23 review results for the Hang Seng Tech Index were announced on Friday 17 November after the close.
There were no ADDs to or DELETEs from the index, in something of a surprise.
The “big flow” on HS TECH is the downweight on Xiaomi Corp (1810 HK) due to sharp capping after significant outperformance since the August review.

HSCEI Index Rebalance: Zhongsheng (881 HK) Uses Up Another Life

For a second review running, Zhongsheng Group (881 HK) has avoided being deleted from the Hang Seng China Enterprises Index (HSCEI INDEX).
That means China Unicom Hong Kong (762 HK) misses out on index inclusion, but there is still hope for the next one.
There does not appear to be any significant positioning on either stock and any large moves early in the coming week could be short lived.

A/H Premium Tracker (To 17 Nov): H up Vs A Despite SOUTHBOUND Net Selling; High Div SOEs Normalising

The New and Better (16 weeks old) A-H Monitor has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
Hs with H/A pairs outperform their As on average with higher-liquidity Hs outperforming more. High Premium As not seeing shrinking premia on average.
SOUTHBOUND and NORTHBOUND were net sells overall. It looked like the combination of NORTHBOUND and SOUTHBOUND put on a long H short A in the non-bank financial sector.

HSCEI Dec23 Index Review/Flows – NO ADDs, No DELETEs; ~2.5% One Way

The HSCEI Review for December 2023 was announced on Friday 17 November.
There were no ADDs and no DELETEs, which was a bit of a surprise.
There is about 2.8% one-way to trade. Alibaba (ADR) (BABA US) is a sell across all three major indices.

Merger Arb Mondays (20 Nov) – Eoflow, Origin, OreCorp, Azure, Hollysys, Toyo, Amara, Haitong Intl

We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads – Eoflow (294090 KS), 111 Inc (YI US), Irc Ltd (1029 HK), Hollysys Automation Technologies (HOLI US), Origin Energy (ORG AU), JSR Corp (4185 JP), Healius (HLS AU).
Lowest spreads – Azure Minerals (AZS AU), Pact Group Holdings (PGH AU), Tietto Minerals Ltd (TIE AU), T&K Toka Co Ltd (4636 JP), IJTT Co., Ltd. (7315 JP).

HSCI Index Rebalance: Keep (3650 HK) & TUHU Car (9690 HK) Added

Keep Inc (3650 HK) and Tuhu Car (9690 HK) will be added to the Hang Seng Composite Index (HSCI) after the close of trading on 1 December.
Keep (3650 HK) will be added to Southbound Stock Connect from the open on 4 December while Tuhu Car (9690 HK) will only be added to Stock Connect in April.
There are lock-up expiries on both stocks, prior to or after inclusion in Stock Connect, and trading strategies will need to take that into account.

HK Connect SOUTHBOUND (To 17 Nov 23); High-Div SOEs Pause, Tech + ETFs Break 16wk Inflow Streak